"Following months of political pressure, China today revalued the yuan to 8.11 for every dollar, scrapping a decade-long peg to the currency in favor of a more flexible band using a "basket of currencies." "

""At 2% vs. the greenback, this yuan revaluation is unlikely to affect the U.S. trade deficit with China or any of China's trade flows or economic conditions at all," Carl B. Weinberg, chief economist of High Frequency Economics, wrote in a note to clients today. "Local energy and commodity prices will come down a pinch, but the variations will be small. This is a nice token move, but it is no economic knockout.""

It's a token gesture and largely political. It still won't stop the huge trade imbalance that the world experiences with China from ocurring. Let's face it. China is the manufacturing hub of the world. Anything can be produced cheaply there (India is a close second). Just look at the backlog of incoming Chinese cargo containers at USA ports and you'll see what i'm talking about.
Even if the USA and Europe kept their duties or import quotas on Chinese goods, China's comparitive trading advantage is simple too large to have any meaningful effect.

Interestingly this decision comes at a time when CNOOC (a large chniese oil company) wants to buy a large USA oil company (UNOCAL) to feed their hungry energy appetite but i dont this this revaluation will help CNOOC's efforts in the eyes of the US government.

If you want to stop wars between countries then open up trade with them and relish the results. personally, I am disappointed that they revalued but i guess the Chinese want some great concession from the USA as well.

I recommend a book called China, Inc. to give good insight on this roaring Asian tiger. There is alot to talk about that cannot be posted in this small window.

This has interesting consequences, in that China has bowed to intense pressure from the industrialized economies. China has been pressured by the G7 for literally years to unpeg its Yuan. Typically we only see pegged currencies, when the country's economy is weak, small or very dependent on a certain country. Clearly the Chinese Yuan does not fit any of these characteristics (the dependency on the US is arguable, as China has large trade surpluses with a number of industrialized countries). Such a currency should be allowed to float freely, or at the very least become a managed float (see Japan). The use of a basket of currencies, is interesting, but a relatively symbolic move on behalf of China.

The question remains though: What is this basket of currencies going to include? The USD, JPY, and EUR, and what? the GBP, AUD, CHF, CAD?

Yu138086....Trade? REAL trade? with China??? or do you mean FAIR trade? As long as you have a slave labor pool to draw on and a country that refuses to enforce internationally accepted copyright and patent laws, you will never have real trade with China....besides, if you don't have a open economy how can you value your currency? Remember the ruble during the Soviet era?

Quoting Bhill (Reply 3):As long as you have a slave labor pool to draw on and a country that refuses to enforce internationally accepted copyright and patent laws

A wealthy China will be better at combatting slave labor, piracy, and free trade than a poor one, and in something like the last twenty years Chinese per capita income has quadrupled, and almost half a billion people have been lifted above the poverty line. Engaging the population economically is always better than isolation (see Cuba, N. Korea, etc).

Bhill,
Yes it is true but not new. China has lax views to priacy/ trademark/ copywright laws but this is improving. Regardless, billions of $$ in FDI (foreign direct invesment) buy not only USA companies but from other countries continues to flood into the Chinese marketplace. Such companes much do their utmost best to protect their designs and prototypes but they know this ahead of time before they enter into their joint ventures with Chinese firms.

If it wasnt for low wage China, USA companies would find it very difficult to post million or even billion dollar profits on their books and impress their greedy shareholders. Just ask Walmart, Target and Best Buy. The two countries are economically linked at the belly whether you like it or not.

Low wage compared to the USA wages... YES... but alot of the Chinese wages have actually risen for the local Chinese workers creating a rising middle class there that will one day dwarf the USA middle class in terms of population. Actually they may be better off since debt is not readily available there so they will OWN everything they buy - A true OWNERSHIP culture. Although its not talked about, I already believe China is the leading economic superpower of the world. They are openly buying up foreign assets in CASH to support their strong growth at home as well as making the necessary investments domestically to ensure they keep their economic position stong going forward.

Too bad they didnt take over UNOCAL. It's time for an economic superpower to rise to counterbalance the muscle of the USA. Militarily it was Russia until they were bought out by the Yanks. Economically it will be/ already is China.

Agreed. From a socio-economic perspective China has come miles, but it has still got a long way to go. Let's not forget that greed and corruption spread like wild-fire in booming economies, and foreign investors will happily exploit situations if they can get away with it. (Well, not Martha; but other people ). It will be interesting to see how currency and commodity traders take advantage of this news.

Quoting Yu138086 (Reply 5):... but alot of the Chinese wages have actually risen for the local Chinese workers creating a rising middle class... they may be better off since debt is not readily available there so they will OWN everything they buy - A true OWNERSHIP culture.

From the middle-class perspective, a sudden gain in wealth often tends to breed an explosion in household spending. In the next decade, I would expect China to become an even larger powerhouse in terms of spending money on high-priced gadgetries and brand-names. Don't be surprised if that "Ownership mentality" fades quickly as the economy rebounds. People will get a taste of financial freedom and ability, and they will like it a lot.

Quoting Yu138086 (Reply 5):If it wasnt for low wage China, USA companies would find it very difficult to post million or even billion dollar profits on their books and impress their greedy shareholders.

...And this is a good thing? ( The economy is more than a soaring Dow-Jones )

Quoting Yu138086 (Reply 5):Low wage compared to the USA wages... YES... but alot of the Chinese wages have actually risen for the local Chinese workers creating a rising middle class there that will one day dwarf the USA middle class in terms of population.

...And I'm sure they'll readily consume an increasing number of US branded goods produced in China

Quoting Soyuzavia (Reply 6):
This is something that most people actually tend to overlook. The US has never 'run the show'. And anyone who does think so needs a reality check.

You're setting up a strawman just that you can knock it down ( or maybe throw a barb in as well )

They don't need to, or even should "Run the show". They should be looking out for their own economic base, not just the monied interests. I should think that the US is plundering its middle class to the advantage of China ( and US' own plutocracy ) should be regarded as a positive development to the 'Pax China' crowd. ( You may already be happy, as excersized by the relish you demonstrate )

Yeah, so the theory goes ( and went ) as over the years I've done a complete 180 on that whole "engagement" theory. A wealthy China will also be a larger military threat as well. As far as this emboldening a people of unshackling itself of a brutal regime, dream on. As Keynes so astutely noted: "....In the long run...we're all dead". Be a martyr to a system/theory, as well you may, but not me.

Quoting MaverickM11 (Reply 4):A wealthy China will be better at combatting slave labor, piracy, and free trade than a poor one, and in something like the last twenty years Chinese per capita income has quadrupled, and almost half a billion people have been lifted above the poverty line. Engaging the population economically is always better than isolation (see Cuba, N. Korea, etc).

Great. Finance their military via trade surpluses. Betcha' the multi-nationals are licking their chops over THAT docile labor pool. ( BTW, aren't you forgetting a brutal hidebound regime's complicity in the rather grim life of most there? )

Quoting MaverickM11 (Reply 10):Not so much a "theory" as a fact that's proven every day around the world...

Bullshit. Typical MBA textbook "classical economics" Adam Smith horseshit...treating economics like it's a goddamned religion to be followed to the end ( that it rewards the monied elite is mere coincidence I'm sure )

Define success. Dow-Jones cracking 5000+? Wal-Mart? A regime showing no signs of relenting their iron-fisted control ( to the contrary, the recent sabre-rattling sure doesn't help their case...didn't ROK pull this shit about a year earlier as well? ) over a burgeoning economy? Oh they like "capitalism" all right; Capitalist money. That US-based multi-nationals are raking in the windfalls from all that cheap labor is but a mere coincidence and tertiary benefit in an excersize of "engagement", right? . That's great the Chinese public are getting a taste of a better life, and I hope they're enjoying all those I-Pods and all, but it comes at a price of shrinking the middle class here...and more are going down than up. Economic base shrinks....demand drops....more pressure on producers to offshore...unemployemt ( underemployment really ) increases...demand drops....so forth. No way in hell price drops will mitigate ( let alone reverse ) this downward spiral. The Currency valuation rate change is a good sign, but it's just a bone. A 2% out of 40 is a day late and a couple of hundred dollars short. "Free-trade" my ass.

Quoting MaverickM11 (Reply 12):Not happening, and as 1+ billion Chinese become wealthier, they'll start to demand more goods and services, including American ones.

The only goods I see China buying are American corporations. We are selling them our seed corn for shortsighted greed. The way current mindset lambasts the Fmr Clinton administration for not dealing with looming terrorism threats is one that will lambast Bush for not dealing with China and unchecked illegal immigration threatening our children's future.

In our "Quote of the Day," the vice chairman of the China Iron and Steel Association, responding to the issue of whether foreigners could take over Chinese companies, said -- quote -- "The steel industry is an important basic industry for the country's national economy," that is China's national economy, "how can we put such an industry in the hands of foreigners?"

Quoting Pope (Reply 17):Funny how communist deplore the evils of capitalism - but figure out how to use it to their favor whenever it suits them.

the leaders figured they would jump in on the money game scam like the rest of the industrialized countries

Quoting Pope (Reply 17):-- In all seriousness, this is a good first step. But Americans need to be very careful what we ask for. A true float of the yuan would cause almost overnight inflation in the US.

owning the biggest number of US bonds makes the outlook bleak for our economy if something happens with our foreign relations.

Quoting B744F (Reply 16):Proven fact? the only proven facts are the horrible number of people living and dying in poverty while the 10% of the world enjoys their material goods

This is a rather distorted view of what is happening in Asia. In the recent past, China and other Asian nations have seen hundreds of millions of people lifted out of abject poverty and into a middle-class existence, at least relative to global average living standards. The development of Asia since World War II has been the biggest economic miracle in human history, and it has been driven in overwhelming part by exports to the West.

Most Western countries spent many decades in the painful but necessary middle stages of the Industrial Revolution. For Japan, Taiwan, Hong Kong, South Korea, and many others, this progress has happened almost overnight. Long-term GDP and income growth are strongly correlated with economic and political freedom, not Marxist notions of Western "exploitation."

Quoting B744F (Reply 18):owning the biggest number of US bonds makes the outlook bleak for our economy if something happens with our foreign relations.

Japan holds far more Treasuries than China ($685 billion vs. $244 billion), partly as a result of the BOJ's currency market interventions to keep the Yen weak against the dollar:

The uneasy equilibrium between the US and Asia, especially China, has been called the "Bretton Woods II" system in academic literature, after the pegged exchange rate system that lasted from WWII to 1971. It has cost the US in terms of jobs, especially manufacturing jobs, although not as many as some would have us believe, as a stronger renminbi would simply divert many of the jobs that are going to China to many other low labor cost nations instead of keeping them here.

However, it has also facilitated US economic growth by keeping inflation low, the result of low-priced Asian goods. Lower inflation, combined with massive recycling of dollars earned through trade surpluses into US Treasury notes, have kept long term interest rates low. This makes mortgages more afforable and increases real estate values, allows firms easier access to capital for investment projects, and allows the US government to finance its budget deficits without raising taxes or paying higher interest rates to attract lenders.

Is this situation desirable or sustainable in the long term? Probably not. But it would be a mistake to characterize it as a lose-lose scenario for the US. Rather, there are costs and benefits for both parties involved. China, having rightly or wrongly seized on an export-driven economy in lieu of domestic development, gains a market for its products and enjoys rapid growth, at the cost of being forced to buy low-yielding US debt with its trade surplus to maintain the peg instead of funding investments at home. The US gains cheap products and cheap financing, at the cost of lost domestic jobs and large trade deficits.

Quoting Canuckpaxguy (Reply 7):From the middle-class perspective, a sudden gain in wealth often tends to breed an explosion in household spending

This is very evident in the fact that VISA's lobbying was instrumental in Beijing being awarded the 2008 Olympics. A population of 1.2 billion with a burgeoning middle class is going to be in need of credit.

Quoting NKP S2 (Reply 8):You're setting up a strawman just that you can knock it down ( or maybe throw a barb in as well )

Sorry, it seems the text I posted was not what was written on my textpad. I wrote more clarifying that the comment was directed towards the "Fox News" crowd in direct reference to snippets of their 'business' news I have seen in the last week or so when in regards to the Chinese economy.

What they don't realise is that since the days of the Silk Road, China has been IT. The closure of the Silk Road routes by the Muslims forced the Europeans to colonise Africa and Asia and also led to Columbus 'discovering' the Americas -- all in the name of finding new trade routes to China. Bar a couple of decades in the era of Mao, world trade has basically revolved around China.

China will always hold the upper hand, as is evident in the minute valuation of the yuan.

Quoting B2707SST (Reply 19):The development of Asia since World War II has been the biggest economic miracle in human history, and it has been driven in overwhelming part by exports to the West.

The development was thanks to their economic system put in place before this child labor stuff that America and other countries have used. China has stated their conditions are getting worse.

Quoting B2707SST (Reply 19):Japan holds far more Treasuries than China ($685 billion vs. $244 billion), partly as a result of the BOJ's currency market interventions to keep the Yen weak against the dollar:

You're right, but that is just a recent change. My mistake. But it will be a problem in the future

Quoting B2707SST (Reply 19):However, it has also facilitated US economic growth by keeping inflation low, the result of low-priced Asian goods.

Quoting B744F (Reply 23):And these people working in sweat shops are suffering because of it.

You can't have people go from subsistence farming to $40K/year with full benefits and paid vacation. There is a rough transition period, but it is still better than the subsistence farming (or worse) that preceded it.

E pur si muove -Galileo

25 B2707SST
: Most Westerners find sweatshops abhorrent, as well we should given the resources and options available in our societies. However, for poor Asian subs

26 NKP S2
: Another strawman. Why is it always a black vs white issue with you people? Tethering a counter-arument to an extreme ( in order to discredit it ) I'm

27 B744F
: WSJ a few weeks ago And as I showed in another thread, 40k a year with full benefits is far less than half of the US population. Just a strawman argu

28 MD11Engineer
: You always have to relate the income to the costs of living. I had discussions with my ex brothers in law in the Philippines, who thought my income b

29 MaverickM11
: A half billion people have been lifted above the poverty line in the last two decades--all because China's economy has opened up. Yes and as I've sai

30 B2707SST
: Four problems with this. First, it's not true. NAFTA went into effect in 1994. Apart from a temporary spike due to the 1990-91 recession's depression

31 NKP S2
: The hell it isn't. You're twisting this around and trying to move the goalposts of this argument. Now I see you're interpreting the term so broadly I

32 MaverickM11
: How convenient for you that nothing backs your argument

33 LJ
: I hope you don't use this argument to support the child labour in the Chinese toy industry (has been well documented thus can't be denied). It would

34 MaverickM11
: Those goods still require knowledge and technology to create, which is theoretically should be the domain of the US--despite the fact that certain gr

35 Mrniji
: Careful with such assumptions.. the world bank indicator of US$$ 1 a day as benchmark for the poverty is not accurate at all! The introduction of PPP

36 MaverickM11
: That's why I said 500 million people have been lifted above the poverty line and made no ascertainments otherwise as to their happiness. Regardless,

37 NKP S2
: ....And what backs yours? That they all agree with each other? There move the goalposts again. Ahhh, so then it's all theoretical afterall then, isn'

38 MaverickM11
: For starters, there *are* economists that back my theories. In fact most of my theories come from said economists and real world experience, and not

39 LJ
: In theory yes, in practise no. Ever wondered why the Chinese government is so keen on Linux??? Ever wondered why they just bought Rover???? The Chine

40 FDXmech
: Stalin couldn't have put better himself when transforming the USSR from an agrarian to industrial society. Your using the "industrial revolution" for

41 MaverickM11
: PARTS of the world are no longer in that stage but it was a necessary stage in order to move forward. No I wouldn't, Michael Moore, because I have re

42 FDXMECH
: How about paying a fair wage for a days work. It's worked well for generations and has created a thriving middle class able to sustain a nation with